DLT Initiatives in Digital Bond Issuance

At UOB, we believe in being at the forefront of providing progressive financial solutions that meet the needs of companies. This means anticipating market trends and having the foresight to strike new strategic alliances with like-minded parties such as ADDX and Marketnode to develop digital capital market infrastructure.

Given the rise in the use of digital securities to enhance the efficiency of bonds and other fixed income instruments in recent years, these collaborations enable the use of distributed ledger technology (DLT) and asset tokenisation to help our corporate clients such as Sembcorp tap the benefits of digital bond issuance for security, time and cost efficiencies.

Key benefits of using DLT for Digital Bond Issuance

Accuracy and Cost Effectiveness

Less error-prone and more cost effective compared to traditional bonds.

Enhancement of Bonds and Other Fixed Income Instruments

Allows the fractionalising of bonds to smaller amounts, encouraging affordability and portfolio diversification

Security and Time Efficiencies

Decreases the number of intermediaries and processes during the issuance and listing process

Technology advancement

Adoption of new technology will result in more capital raised

Digital Bond Issuance

Use Case #1:
UOB is the first financial institution in Singapore to pilot a digital bond issuance on Marketnode's exchange-operated digital asset issuance platform

In June 2021, the Bank piloted the digital issuance of our latest bond offering on Marketnode’s digital issuance, depository and servicing platform. This reinforces our focus on supporting open digital solutions and ecosystems that help develop Singapore’s capital markets infrastructure and the financial sector.

Marketnode, a joint venture between Singapore Exchange and Temasek, is an exchange-led digital asset venture focused on digitising capital markets workflows through smart contracts, distributed ledger and tokenisation technologies. One of Marketnode’s products, a digital bond issuance platform, taps distributed ledger technology to connect various parties involved in the transaction – from issuers to investors – and tokenise the security, enabling more efficient bond issuances.

Key Benefits of Digitisation

Ability to achieve faster and more secure settlements
Reduction of risk by minimising manual entry and enabling seamless multi-party coordination
Potential to connect to other digital services (i.e., digital security trading venues)

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Use Case #2:
UOB was appointed as a joint lead manager for the $675M sustainability-linked bond issued by Sembcorp and partnered ADDX to pioneer the use of smart contract technology to custodise and manage a $50M portion of the bond

In October 2021, UOB and digital securities exchange, ADDX have concluded the digitisation and digital custody of the inaugural sustainability-linked bond launched by Sembcorp Industries (Sembcorp).

Sembcorp’s ten-and-a-half-year sustainability-linked bond is due in 2032 and has been priced at a coupon rate of 2.66 percent per annum. Sustainability-linked bonds involve issuers pledging to improve their performance against tailor-made ESG (environmental, social and governance) targets. Through this sustainability-linked bond, Sembcorp has committed to a Sustainability Performance Target (SPT) of reducing its greenhouse gas emissions intensity to 0.40 tonnes of carbon dioxide equivalent per megawatt hour (tCO2e/MWh) or lower by 31 December 2025. If the SPT is not met, the coupon rate will step up by 0.25 percentage points per annum from the first interest payment date on or after 1 April 2026.

Digital bonds make use of technologies such as blockchain and smart contracts to eliminate manual processes in the bond’s custody and post-trade administration. A digital bond can be managed more efficiently as corporate actions such as coupon payments can be carried out with self-executing instructions on a single, distributed ledger. Digital bonds are also more efficient, less error prone and less costly for the issuer, investors and the banks underwriting the deal compared with traditional bonds.

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